Gene Perez Your Real Estate Consultant, Santa Maria Homes: September 2009

Is The FDIC Killing Short Sales?

As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate.  To read the blog, click here.  Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure.  For the life of me, I couldn't figure out why they were doing this.  The BPO came in at the contract price of $275k, with a net to IndyMac of $241k.  What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out.  You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009.  Guess who the investors are behind OneWest?  George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).  

Now, listen to the deal they got from the FDIC....

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts).  They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following:  For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss.  The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan.  Let's use my clients situation as an example:

Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200

OneWest pays $334,600 for the loan

We have an all cash offer of $241,000, net to OneWest.

So, let's do the math, shall we?  The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer.  In this case, $485,200-$241,000, or $244,200.  Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss".  So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360.  Remember, OneWest paid $334,600 for the loan.  So, OneWest puts $101,760 in their pocket, thanks to the FDIC.  Folks, that is over $100k of our hard-earned tax dollars!

So, you ask...Why does this program hurt short sales?  Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES!  The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure?  And we wonder why nobody can get a Loan Modification?  Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k?  And, to add injury to insult, they have held this loan for 6 months!  Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE!  Imagine if they could make $100k, then get a deficiency judgement!  Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC.  Some of them include:  Bank of America (go figure), CitiMortgage, Wells Fargo, etc.  

This entire agreement between the FDIC and OneWest can be found here, on the FDIC website.  It's all there, for the world to see!  They have it all layed out.  All of the formulas, worksheets, etc.  

Now, it's up to us to bring it to the attention of our elected officials and the media.  Enough is Enough!

UPDATE 9/18/09:  I JUST READ AN AWESOME ARTICLE ON THIS, THAT GOES INTO WAY MORE DETAIL THAN MY BLOG ABOVE.  TAKE THE TIME TO READ IT WHEN YOU GET A CHANCE! CLICK HERE TO READ IT.

Wait, it gets better...The FDIC just announced that it needs to start borrowing money from the U.S. Treasure in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements).  Go Figure!  Click Here to read it.

 

 

 

This week a client was referred to me that wants to buy a house. 

During our initial phone conversation, one of the first things I always ask is whether they have a lender and are pre approved for a loan. 

He indicated that he did have a lender, that he found online. (Uh-oh).  And, that he was preapproved. The Brevard County Real Estate market is considered a distressed market.  It is so important for a buyer to have a local lender and a local appraiser that understands our market.  

My next question was whether or not he had received a Good Faith Estimate from the lender.  He had not. (Uh-oh #2). Every buyer should be provided with a Good Faith Estimate when being Preapproved for a loan.  This gives the buyer an estimate of his closing expenses and prepaid expenses.  It will also provide an estimate of his monthly mortgage payment amount and his anticipated interest rate.

The buyer gave me his lender's long distance and toll free phone numbers (uh-oh #3) as I always talk to the lender at the beginning of a transaction, before we head out to look at any houses.

I called to get more info from his lender. I called 3 times in 2 days (uh-oh#4) with no response.  His voice message said, "I will return your call in the order in which it was received."  (uh-oh #5).

I have to know what type of loan he will be financing the house with, so I know what type of home he can buy. I finally found that this buyer is purchasing with an FHA mortgage, with a 3 1/2% down payment. So, he won't be able to purchase a home that requires extensive repairs. The roof has to be "newer" and so does the air conditioning system.  There typically can't be broken windows. The house must have heat and a stove and it typically cannot be in some phase of remodeling.  If this buyer was getting a conventional loan with 20% down he would be able to look at completely different properties, as there would not be many restrictions on what he could buy.  In paying cash, a buyer could purchase any home he wants.

When I was talked to the lender, I received the Good Faith Estimate (as did the buyer).  My teeth nearly fell out of my mouth, when I looked at the figures. (uh-oh #6). The fees were some of the highest I had ever seen. The interest rate was too high, the estimate was full of unnecessary junk fees.  I couldn't believe my eyes!

I recommended this buyer get additional estimates from LOCAL lenders to compare fees.  I know that he can do much better than what he was quoted. 

In this market, as Patricia Kennedy pointed out, in a recent post she wrote, not only is it important to come in with a strong offer to purchase a house, but, listing agents also look at the pre approval letter with the lender info to determine whether they will accept the offer.

If a buyer winds up in a multiple offer situation, which many buyers here in the under $125K price range do, the best offer is going to be choosen based on which one has the best chance of getting to closing. Here in our market the listing agent often times wants a local, reputable lender, that knows the market, that has a processing center right here in town. They know if they tell us, upfront, that they can do the deal, then they can do it. They want the smoothest transaction possible, that won't get snagged or delayed. They don't want any surprises.

In our market, a nameless face, with exorbinant fees and a long distance or toll free number, that doesn't return phone calls, from somewhere across the country, is not going to help your offer along, to get you the house that you want to buy. 

If your offer is accepted, will they be able to get you to closing?

All lenders are NOT alike. And, all online lenders are NOT alike.

Get a couple of estimates and talk to a couple of lenders.

Be sure you do your homework BEFORE you head out the door to look at houses. 

FOOTNOTE: I later found out, after the buyer talked to a local lender, that he is self employed. The buyer indicated that he had not discussed his employment situation, nor the fact that he had recently opened a new business during his interview with the online lender. So, now, I am waiting to hear whether this buyer will be able to buy a house at all!

Sandy Shores REALTOR®, Melbourne/Palm Bay FL Real Estate

Brevard County Real Estate & Investing

I also buy, sell, rent, own and manage Investment Property.

 

My Last post regarding this subject was back on September 15, 2009.  Yes, I know that was just short of two weeks ago.  But I think the importance of not being caught off guard by your lender is a good reason to touch on this subject quite often.

To many times I’ve seen another lender or mortgage broker tell a borrower that they have been “Approved”  for a loan when they have only a Pre-Qualification or a Conditional Approval.

When a lender gives you a Loan Commitment it is usually labeled “Approved with Conditions”.  It is this terminology that confuses most people.  Though your loan has been “Approved” by a lender, there may still be some conditions that the lender needs to clear before they fund on a transaction.  These may be income, or asset documents, or something other the lender needs to clear up.

When you present a Loan Commitment from your lender to your Realtor, in order to be sure that all conditions possible have been cleared, the only conditions listed should be:

o   Earnest Money Agreement

o   Title Report

o   Appraisal to Support Sales Price

This way you, and your Realtor, know that your income and asset documents, and any other additional verification that the lender needs have been reviewed by an underwriter, and the only thing left to do is to go find a house.

Remember though that depending on how long you shop for a house, you may need to update income and asset documents, or provide additional verifications.  During the home shopping period, it is important that you send a copy of any income statements, or bank statement received after obtaining the Loan Commitment to your lender so they can keep the Loan Commitment up to date and overcome any issues that may develop.

Not having a clear Loan Commitment, as noted above, can cause frustration in having believed that the loan was approved, only to find out that there is a condition or two that cannot be met.  In the case of already putting down Earnest Money, this could mean the loss of that deposit.

When your lender tells you “Your loan is approved”, sit down with them and go over that approval in detail so you know exactly where you stand and what to tell your Realtor.

 

 

My Last post regarding this subject was back on September 15, 2009.  Yes, I know that was just short of two weeks ago.  But I think the importance of not being caught off guard by your lender is a good reason to touch on this subject quite often.

To many times I’ve seen another lender or mortgage broker tell a borrower that they have been “Approved”  for a loan when they have only a Pre-Qualification or a Conditional Approval.

When a lender gives you a Loan Commitment it is usually labeled “Approved with Conditions”.  It is this terminology that confuses most people.  Though your loan has been “Approved” by a lender, there may still be some conditions that the lender needs to clear before they fund on a transaction.  These may be income, or asset documents, or something other the lender needs to clear up.

When you present a Loan Commitment from your lender to your Realtor, in order to be sure that all conditions possible have been cleared, the only conditions listed should be:

o   Earnest Money Agreement

o   Title Report

o   Appraisal to Support Sales Price

This way you, and your Realtor, know that your income and asset documents, and any other additional verification that the lender needs have been reviewed by an underwriter, and the only thing left to do is to go find a house.

Remember though that depending on how long you shop for a house, you may need to update income and asset documents, or provide additional verifications.  During the home shopping period, it is important that you send a copy of any income statements, or bank statement received after obtaining the Loan Commitment to your lender so they can keep the Loan Commitment up to date and overcome any issues that may develop.

Not having a clear Loan Commitment, as noted above, can cause frustration in having believed that the loan was approved, only to find out that there is a condition or two that cannot be met.  In the case of already putting down Earnest Money, this could mean the loss of that deposit.

When your lender tells you “Your loan is approved”, sit down with them and go over that approval in detail so you know exactly where you stand and what to tell your Realtor.

 

"VENI, VIDI, VICI"

Julius Caesar is attributed with saying these immortal words (translation "I came, I saw, I conquered") in 47 BC. The Romans, for a many years, quite literally conquered the world; and they did it one battle at a time.

A marketing campaign is like a military campaign: there's a short-term goal and a tactic for achieving it. Notice I said "short term". A war is (alas) medium or long-term and a marketing program likewise. A marketing program (like the a war), is made up from a series of campaigns, each leading to what is an ultimate objective.

VENI

Now, this is "marketing according to Dave Segrove", not something I read somewhere else. While I consider long-term marketing strategies okay, I think they belong in the realm of larger companies or, preferably, nowhere.

Ooh – he's picking a fight...

Not really, and here's why.

I see this particularly with small companies, but the marketing plan (or campaign), becomes another word for "vision" : In two years, by doing this and that we're going to achieve....

In order for a marketing plan, like a military campaign, to stand a chance of working in a small company (in my humble opinion), is should:

1. be short term (less than six months);
2. have clearly stated and immovable and tangible goals;
3. have a start and end date;
4. include a method to measure success;
5. have a plan to get there;
6. includes the necessary resources;

VIDI

The immovable and tangible goals should be engraved in stone. Again, I go back to the military analogy. The campaign to conquer a city will help win the overall war. Once the objective has been stated, is should not really be changed. The other parts of the plan may change, heck, plans do all the time, but if the goal changes, then a new plan must be called for.

When I work with clients, we often have to go back to basics, determining what their business goals are for, say the next couple of years, from which we can develop a marketing strategy, which is broken down into short-term plans. If plan A succeeds, we develop plan B. More often than not, we run several at once, building fail-over and backup into our game plan.

A marketing plan can be one page, but (in the Dave Segrove method), must include all 6 items. If you cannot develop a plan that includes all six, then perhaps you should question then plan idea and take a step back and look at your overall strategy.

VICI

With the proper planning and goals, you're all set to go-a-conquering. Hail Caesar - and steer clear of anyone called Brutus.

I write about different marketing strategies and techniques, both traditional and non in my online newsletter Webby's Updates which you can read at www.JDELtd.com and subscribe to if you so choose. You can download this and other articles from by Small Business GENetics site, www.sbgenetics.com

Syndicate Your ActiveRain Blogs with RSS

What is syndication and why should you "Syndicate Your ActiveRain Blogs?"  Driving traffic and exposure to your Blog is the primary reason.  RSS - Really Simple Syndication is a great way to connect your ActiveRain Blog to other Blogs and websites.  Members on ActiveRain have an RSS feed button located on the sidebar of their Blog.  Click on it to see your options and how it can be used to expand your reach to a larger audience via other sites and locations on the web.

Adding an RSS feed to your ActiveRain Blog on your ActiveRain Blog is nice, but no where near the value and benefit of having an RSS feed in other locations. Do you have a website?  Do you use an email signature?  Are you utilizing online marketing?  Take advantage of this tiny little tool so you can get BIG results.  That's why it's here.  If you're not familiar with RSS Feeds, Readers, and tools etc., here's a really good post that will give you more details and an explanation.

 

RSS is a great way to syndicate your Blog posts and get them out there and in front of a larger potential audience. Using RSS feeds is also a great way to have information and great content delivered back to you without having to go out and look for it. This will save you valuable time browsing the web for content and information that you might be interested in. 

 

Personally, I use Google Reader for all my RSS feeds to the sites I like to get updates and new information from.  This allows me the ability to scroll through hundreds of articles from various sites and blogs easily and conveniently without having to go to each site and see what's newly published. You can also share certain posts and articles with others that you follow, and they can share with you. 

If you're looking for some ways to get back-links and Web Traffic, I just watched THIS VIDEO that explains how to do this using FeedAgg.com. You can see how many other RE professionals have done this already by Clicking Here. You can search their site for various Real Estate type RSS feeds that have already been added to the site. Why not add yours while you're there.  It's just one more way to syndicate your ActiveRain Blog.

Teaching your clients how to subscribe to your Blog via RSS is a valuable tool, both for them, and for you.

DON'T FORGET TO DO THIS WITH THE RSS FROM YOUR ACTIVERAIN OUTSIDE BLOGS TOO.

If I'm away from this Blog for any length of time, it's possible you might find me over on one of these other sites, I make my rounds every so often because I know that if you're not here, you're probably over there too! :-)

                                                 

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Often a fortuitous event will have an inauspicious moment or two involved.  It is easy to ignore the overall achievement and focus on the angst, the problems, the wrangling and the hindsight of shoulda, woulda, coulda.  The dark moments can overshadow the accomplishment if the spotlight is focused on what went wrong instead of what went right.  I often remind myself to concentrate on the lemonade not the lemons. Such is real estate and such is life.

 

As participants in the buying and selling of real estate it is important to resolve the issues, settle the disputes and not let the quibbles and personalities cloud the larger success of achieving a sizable accomplishment.  Despair and delight come from within and are shaded by attitude, experiences and individual perception.  It is a choice whether we recognize the success of the event by celebrating the hurdles we cleared and lessons learned, or lessen the achievement with continued self-sabotage by maintaining a narrow focus on the negative.

 

 

A few months ago I encountered an agent I had not seen for years.  We chatted briefly and she said she remembered there were some big challenges in the transaction we worked together on, but in the end we closed the deal and everyone was happy.  The buyer recently called to thank me for helping them make a savvy real estate purchase, and asked me to watch their neighborhood of choice for a fabulous view home.  The dicey issues of raw sewage under the house and a faulty septic tank were resolved long ago,

 

It does not require a miracle to resolve real estate issues.  Often a change in perspective and attitude will bring about understanding, compassion and resolution.

Norma Toering & Team RE/MAX Palos Verdes Realty
(310) 493-8333 / Office Phone: (310) 831-0800

PalosVerdesLifestyle - Nominated by Relocation.com as one of the top ten Los Angeles area real estate blogs. Ranked by Technorati in the top 1% of all blogs. As seen in the Daily Breeze newspaper.

South Bay Los Angeles cities I sell real estate, property, houses and homes in: Palos Verdes Estates, Rolling Hills, Rolling Hills Estates, Rancho Palos Verdes, San Pedro, Long Beach, Torrance, Lomita, Redondo Beach, Hermosa Beach and Manhattan Beach.

Find Norma on: Facebook - Twitter - LinkedIn - Email Norma

RPV CA Homes for Sale Blog - Palos Verdes Real Estate
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In real estate, we call a Buyer's market when there are too many homes for sale than buyers. The news media paint the doom and gloom markets all over the country and speak very much in generalization. The public watches the news and believe what they hear.

 

However, as we have always said, Real Estate is LOCAL. One state differs from another. One city. One neighborhood. One set of price range too. No doubt that under $300K here in the greater Frisco TX area are selling like HOT CAKES.

But the buyers are hearing that the economy is bad, and the houses are going into foreclosures. Buyers want to take advantage of these "attractive" pricing. They play How Low You Will Go with the Seller and they act as if they are doing a favor for the Seller for buying their house.

 

In my experience, I have never got involved in as many multiple offer negotiations as I have been since 2003. In fact, I'm getting pretty good at it (fighting multiple offers for buyers and writing back up contracts). It's almost something I always prepare my buyers for. The "talk" about multiple offer situations. Some who may not believe me finds it surprising. They will soon find out the hard way.

With our local economy, my buyers are learning the real truth about the housing market in the area: Don't play a fool about the house you like - especially it is packed with emotions to house your family. Whenever you didn't put your best foot forward, and rather test how low the Seller will go, you may lose the house you really like.

 

But please don't take my word for it.

 

Read the comments below by real estate professionals ALL over the country on a Facebook status I followed over the weekend (mid-September 2009):

Brian Block of Northern VA & D.C. Real Estate - Is it 2009 or 2004? 3 good offers in 48 hours on a house I have for sale!

Rich Jacobson of Kitsap County Washington Real Estate - just had two come in on one of my listings...it's karma!

Chris & Stephanie Somers of Philadelphia Real Estate - Starting to happen more ! Same thing happened to us on a listing we had 2 weeks ago. It was great ! And the seller is very happy !!

Russ Ravary of Michigan Homes for Sale just wrote this hot off the press post about how busy this real estate market it.

A buyer for my listing had 3 offers to choose from in the 2nd week of listing.

A listing of mine had multiple offers in 12 days, and sold for more than asking price.

Another listing of mine sold for more than the Seller's expectation - quoted as per Seller.

 

BOTTOM LINE PEOPLE! It's happening even in a Buyer's market. What Buyer's Market???

 

If you are a real estate professional, please share your Good news here. I really do want to open the minds of Buyers the realities of losing the house you love.

 

So, keeping it real in a Buyer's market - Where's the Buyer's market?

 

 

 

 

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Contact:

Loreena Yeo
Realtor®/ Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.com

Super-serving Frisco, Plano, Dallas, McKinney, Allen, Little Elm, Prosper, Celina, Richardson, Dallas M-Streets, Dallas White Rock Lake area communities and other surrounding areas.

 

 

Copyright © 2009 by Loreena Yeo (3:16 team REALTY).
Keeping It Real in a Buyer's Market - What Buyer's Market????